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The government's yard of properties is filling up fast, with few buyers in sight. The RTC last week canceled plans for a much ballyhooed November auction of $300 million worth of property that was to have raised sorely needed cash. While the agency attributed the cancellation to disagreements with the auction company, experts pinned part of the blame on sluggish real estate markets and tight credit policies among now cautious lenders. In a sign of the agency's eagerness to unload inventory, Seidman last week urged the government to provide financing for buyers to speed the sale of $50 billion in RTC holdings by the end of the year.
The bailout's relentless drain on the U.S. Treasury provided a grim backdrop to the stalemated budget talks. After 125 days of partisan wrangling, negotiators from both parties were nowhere near agreement last week on how to pare $50 billion from the 1991 deficit and $500 billion over the next five years. If a deal is not reached by Oct. 1, the government could face $100 billion of across-the-board budget cuts. While lawmakers contemplated legislation to avert that sweeping move, the White House threatened to veto such a measure in order to force a resolution of the budget deadlock. Said President Bush at week's end: "We're down to the wire."
Yet the budget talks only nibble at the edges of the real deficit problem, partly because both parties agreed earlier this year to keep the S&L bailout off the books. If it were included, the red ink would swell next year from $165 billion to $230 billion. The negotiators are thus struggling to find spending cuts and tax hikes that would still fall short of covering the rising cost of the bailout. Both sides have agreed to boost taxes on alcohol, gasoline and autos priced at $30,000 and up. But such increases would go only partway toward paying for Bush's cherished reduction of the capital-gains tax from a top rate of 33% to 15%.
The budget negotiators remain far apart over who should bear the burden of politically explosive cuts in entitlement spending. Though both sides are willing to slash $73 billion from Medicare over the next five years, the agreement ends there. The White House would spread the pain equally among doctors, hospitals and patients, but the Democrats have avoided specific proposals.
The shortage of courage on all sides in the budget talks provides a pointed reminder of Washington's failure to keep the S&L crisis from raging out of control in the 1980s. After deregulating the industry at the start of the decade, politicians looked the other way as reckless thrifts financed countless condominium blocks and office towers that now stand empty. Meanwhile, many questionable -- and sometimes criminal -- business practices were allowed to flourish. When bond salesmen for Keating's Lincoln Savings and Loan went to work, a memo advised them: "Always remember the weak, meek and ignorant are always good targets."
The big questions for the White House and Congress are how to complete the S&L bailout as swiftly as possible and how to prevent future financial fiascoes. Proposed remedies range from a complete overhaul of banking and thrift legislation to a soak-the-rich scheme that Joseph Kennedy II, a member of the House Banking Committee, put forward last week. Kennedy's plan would slap surtaxes on individuals with incomes over $100,000 a year and most corporations.